NATIONAL OIL INFRASTRUCTURE COMPANY OF ZIMBABWE (PVT) LTD v AC CONTROLS (PVT) LTD and ANOTHER (182 of 2024) [2024] ZWHHC 182 (14 May 2024)

1 HH 182-24 HC 933/21 NATIONAL OIL INFRASTRUCTURE COMPANY OF ZIMBABWE (PVT) LTD versus AC CONTROLS (PVT) LTD and JUSTICE N. T. MTSHIYA (RTD) N. O. HIGH COURT OF ZIMBABWE CHINAMORA J HARARE, 8 March 2022 and 14 May 2024 Opposed Application Prof L Madhuku, for the applicant Adv L Uriri, for the 1st respondent No appearance for the second respondent CHINAMORA J: Background facts The application which confronts me is for an order setting aside an arbitral award made by the second respondent in terms of Article 34 (2) of the Schedule to the Arbitration Act [Chapter 7:15]. Let me outline the facts which gave rise to these proceedings. The applicant and the 1st respondent executed a written agreement for the supply, delivery and installation of instrumentation, control and electrical equipment for the Mabvuku Ethanol Storage Tanks Project. The contract price was US$ 2 268 199.90. It was a material term of the agreement that the applicant would defray the 1st respondent’s costs for materials purchased for the project on production of an invoice, valuation report and interim certificate. The parties amended the agreement on two subsequent occasions in order to address the changes in the country’s monetary policy. The main effect of the amendments was to restructure the cost of the contract and make separate provision for payment of local and foreign costs. Prior to the coming into force of Statutory Instrument 33 of 2019 and the amendments, the first respondent had purchased materials worth US$164 631.34 in June, August and October 2018 for use at the project. The first respondent demanded settlement of the sum of US$ 164 631.34. The HH 182-24 HC 933/21 applicant resisted the demand, contending that in the absence of an interim certificate made out in respect of the said materials, as required by the amendment to their contract, the amount not be dealt with in terms of the amendment to the contract. It was argued that it could only be settled in local currency at the rate of US1.00 equals ZWL1.00 (“the 1:1 rate”). The dispute was referred for arbitration in terms of an arbitral clause in the parties’ agreement. There were two issues agreed for arbitration, the first being whether or not an interim payment certificate and a valuation report had been issued in respect of the amount claimed. The second issue was: in what currency was the amount claimed payable? Before the arbitrator, the first respondent presented the following claim: (a) Payment of outstanding and unpaid invoice amounting to US$ 164 631.34 or its equivalence in Zimbabwean dollars, in accordance with the Reserve Bank of Zimbabwe (RBZ) interbank rate or official auction rate at the date of payment, and In (b) Costs of suit on the legal practitioner and client scale. The applicant’s case The applicant maintained that, in the absence of an interim payment certificate, and on the strength of Statutory Instrument 33 of 2019, the first respondent’s invoice could only be settled in local currency at the rate of 1:1. The applicant’s argument was that the provisions of Statutory Instrument 33 of 2019 are now part of the Finance (No 2 Act) of 2019. On 29 January 2021 in the arbitration proceedings, the second respondent found in favour of the first respondent. In short, the relief sought was granted. It is that award which applicant seeks to set aside. The grounds for challenge are that the award is in conflict with the public policy of Zimbabwe, as it is premised on an incorrect interpretation of the law and that the arbitrator’s findings were made arbitrarily. The applicant contends that the contract price was originally denominated in United States Dollars. The first respondent’s claim arose from materials that it had procured in 2018 and prior the amendment of the agreement. Therefore, the applicant contends that until 22 February 2019, this amount was due and owing in United States Dollars. However, owing to the advent of Statutory Instrument 33 of 2019, the debt was converted to local currency at the rate of 1:1. Consequently, the sum payable became ZWL 164 631.34. The HH 182-24 HC 933/21 applicant also contends that the award was wrong at law in that it directed the applicant to pay at the prevailing interbank rate when the debt arose prior to 22 February 2019. Thus, the applicant argues that, on a correct interpretation of the law (i,e, Statutory Instrument 33 of 2019), payment ought to be made at the rate of 1:1. It is on these grounds that the applicant prays that the arbitral award be set aside. The respondent’s case The first respondent opposed that application arguing that Statutory Instrument 33 of 2019 is not a part of the Finance Act (No 2) Act of 2019, and that these are two different legal instruments. The first respondent contended that the applicant’s argument during the arbitral proceedings was based on Statutory Instrument 33 of 2019 and not the Finance Act. Furthermore, the 1st respondent argues that an incorrect reading of the law by the second respondent does not translate to a decision that is in conflict with public policy as contemplated in the Arbitration Act. In addition, the first respondent contends that the allegation of arbitrariness is not a requirement for the setting aside of an arbitral award. It is on this basis that the first respondent prays that the application be dismissed with costs. Accompanying the opposing papers was the first respondent’s counter application for the registration of the arbitral award in terms of s 35 (1) of the Arbitration Act [Chapter 7:15]. In essence, the first respondent submitted that on 28 February 2018 the parties entered into an agreement for the supply, delivery and installation of instrumentation, control and electrical equipment for the Mabvuku Ethanol Storage Tanks project. A dispute concerning the payment of US$ 164 631.34 ensued and was referred to arbitration. The arbitrator made an award in favour of the first respondent, which is the award that first respondent seeks to register for enforcement. The applicant opposed the first respondent’s counter-application by submitting that the award is incapable of registration and is unenforceable as it is contrary to public policy. In support of its opposition, reference was made to the grounds for setting aside raised in the applicant’s application. The arbitrator’s decision The arbitrator found that the amount claimed was payable in United States currency, or at the prevailing interbank or auction rate on the date of payment. The arbitrator said that the rate HH 182-24 HC 933/21 between the local currency and the United States dollar had changed since 22 February 2019. The second respondent’s further reasoning was that the parties had contracted to continue doing business in United States currency notwithstanding the promulgation of Statutory Instrument 33 of 2019. The applicable law This court is empowered to set aside arbitral award on the grounds that the arbitral award is in conflict with the public policy of Zimbabwe. Article 34 (2) (b) (ii) of the Arbitration Act is the starting point and it reads: “(2) An arbitral award may be set aside by the High Court only if- … (b) the High Court finds, that – … (ii) the award is in conflict with the public policy of Zimbabwe.” The question of public policy as a basis for challenging an arbitral award was discussed in the case of ZESA v Maposa 1999 (2) ZLR 452 (S), where the Supreme Court stated that: “…the approach to be adopted is to construe the public policy defence, as being applicable to either a foreign or domestic award, restrictively in order to preserve and recognise the basic objective of finality in all arbitrations, and to hold such defence applicable only if some fundamental principle of the law or morality or justice is violated. An award will not be contrary to public policy merely because the reasoning or conclusions of the arbitrator are wrong in fact or in law. Where, however, the reasoning or conclusion in an award goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider that the conception of justice in Zimbabwe would be intolerably hurt by the award, then it would be contrary to public policy to uphold it.” See also Chanakira vs. Mapfumo and Anor HH 155-10. The common thread from the above decision and other decisions in this jurisdiction is that a court, even if the decision of the arbitrator is faulty or incorrect, will not ipso facto set aside the award on that basis. The court can only interfere where the decision is outrageous in its defiance of logic and offends against the public sense of justice as contemplated by Zesa v Maphosa supra. See Delta Operations v Origen Corp (Pvt) Ltd 2007 (2) ZLR 81 (S) and Decimal Investments (Pvt) Ltd v Arundel Village (Pvt) Ltd 2012 (1) ZLR 581 (H). The applicant contends that the second respondent’s award is incorrect at law. The authorities I have referred to HH 182-24 HC 933/21 above have established that this cannot be a basis for the setting aside of an award unless the award is outrageous and defies logic and offends against the public sense of justice. I must hasten to state that it was the applicant who gave a voluntary concession that it owed the first respondent. A perusal of the award in particular para 18, the arbitrator agreed with the applicant’s submission that the debt was affected by the provisions of Statutory Instrument 33 of 2019. In my view, such a finding could not have been made if the arbitrator had not considered the applicant’s submissions. Furthermore, the arbitrator noted in para 30 that the parties’ agreement was that foreign debts be paid in United States Dollars, therefore, could not rule that the amount in question was in Zimbabwean dollars at the rate of 1:1. In my view, the parties freely entered the contract between themselves and freely amended it to cater for foreign debts or procurements. It is on the above that I find no merit in the application to set aside the arbitral award. Thus, I am satisfied that the arbitral award is registrable. In the result, I make the following order. 1. The application to set aside the arbitral award be and is hereby dismissed with costs. 2. The counter – application by the first respondent be and is hereby granted. 3. The award by second respondent be and is hereby registered as an order of this Court. Gwaunza & Maposa, applicant’s legal practitioners Mlotshwa & Maguwudze, first respondent’s legal practitioners